1) A U.S. firm with no subsidiaries presently has sales to Brazil amounting to R
ID: 2742753 • Letter: 1
Question
1) A U.S. firm with no subsidiaries presently has sales to Brazil amounting to R200 million, while its Real -denominated expenses amount to R100 million. If it shifts its material orders from its Brazilian suppliers to U.S. suppliers, it could reduce Real-denominated expenses by R20 million and increase dollar-denominated expenses by $15 million. This strategy would _______ the firm's exposure to changes in the Real's movements against the U.S. dollar. Regardless of whether the firm shifts expenses, it is likely to perform better when the Real is valued _______ relative to the dollar.
reduce; high
reduce; low
increase; low
increase; high
2)
A) undeterminable today
$1,115,500
$1,137,500
$1,125,000
A)reduce; high
B)reduce; low
C)increase; low
D)increase; high
Explanation / Answer
1) Expense will be paid in Doller than Sifting Reduce Currency Movement cause Home Contry in US a Doller Country
Shifting perform better when the Real is valued Low relative to the dollar. cause without shifting than firm has to pay more doller for Expenses. than Option B
2) Without any Hedging Plain state not determine in which exchange rate Euro will be convertate than its A) Undeterminable today how many Euro Plain state received after six month.
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